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FRANKFURT, Sept 7 (Reuters) - ArcelorMittal has received a German state funding pledge for half the 110 million euros ($131 million) it plans to invest in a demonstration steel plant that will use hydrogen produced with renewable electricity.
Environment Minister Svenja Schultze said Berlin would pay 55 million euros -- subject to EU approval -- for the direct reduced iron (DRI) plant that will use green hydrogen to reduce iron ore in a CO2-free steelmaking process, ArcelorMittal said in a statement on Tuesday.
The company aims to produce "green" steel from 2025 onwards, obtaining it from clean DRI derived from a yet-to-be built 50 megawatt electrolyser, and melted with steel scrap in an electric arc furnace, which itself will be fuelled by green power.
Uwe Braun, CEO of ArcelorMittal Hamburg, said the plant would enable his company to produce 100,000 tonnes of DRI for steelmaking with green hydrogen by 2025.
Braun said the partial funding from the German government was helpful for the plan. But he also said that the European Commission, tasked to make sure that state money does not distort competition, had to give its approval to allow ArcelorMittal to put "words into deeds".
Currently, ArcelorMittal produces DRI with so-called grey hydrogen, using natural gas.
Hydrogen is considered green when it is produced from renewable power obtained from wind or solar energy and run through an electrolyser.
The port city of Hamburg is building up a hydrogen cluster that ties in a raft of local consumer, energy and manufacturing industries.
ArcelorMittal wants to produce one million tonnes of carbon-neutral steel per year in Hamburg by 2030 to save 800,000 tonnes of CO2 each year.
Its plan for Hamburg is embedded in its strategy to achieve carbon-free output at all of its four German plants - in Bremen, Duisburg and Eisenhuettenstadt as well as Hamburg - alongside projects in other countries.
"The government will not leave the steel industry alone in its transformation," said Schulze. "If the companies invest in carbon-neutral activities and products like green steel now, they will survive in the marketplace of the future and their jobs will be safe."
($1 = 0.8425 euros) (Reporting by Vera Eckert; Editing by Mark Potter and Jane Merriman)